Law digest

Law on combating tax evasion is in force now

The Law On Amendments to the Tax Code Regarding Improvement of Tax Administration, Elimination of Technical and Logical Inconsistencies in Tax Legislation has entered into force.

The signed law is intended to introduce international standards of tax control for all participants of international trade and to implement provisions of the Plan to Combat Base Erosion and Profit Shifting (BEPS Action Plan).

Moreover, the changes set in the document ensure necessary conditions for reforming the State Tax Service and offer opportunities for the transformation of its structure pursuant to a unified legal entity concept. The document also improves the system of tax administration and expands the capabilities of online services for taxpayers. From now on, a taxpayer submitting reports in electronic form or passing electronic identification online in the related user account will be able to file an application on his/her intention to receive documents from the tax authorities in electronic form.

It is expected that implementation of the law’s provisions will expand investment incentives by introducing accelerated depreciation of fixed assets.

 

National Bank will not fine banks for certain major violations till June 2021

The National Bank of Ukraine has introduced a number of measures to support the banking sector in the current economic environment. In particular, until June 2021, no measures will be applied for violating a number of requirements, in particular, related to: capital adequacy; liquidity; credit risk; restrictions on transactions between a bank and subordinated debtors.

This decision will be valid only if violations have arisen due to the negative impact of the quarantine and restrictive measures on the bank or banking group’s performance, and if banks or banking groups have not violated capital adequacy and liquidity ratios as set out in Articles 75 and 76 of the Law On Banks and Banking Activities.

At the same time, the decision does not apply to banks, which, despite NBU recommendations, have distributed profits for 2019 by paying out dividends.

 

Moratorium on state-financed institutions bankruptcy

The Verkhovna Rada has upheld Draft Law No.2276 On Amendments to the Bankruptcy Procedure Code in the second reading and in full, which, in particular, sets a moratorium on the bankruptcy state-financed institutions. In particular, according to the new Bankruptcy Procedure Code, till 21 October 2019 creditors had the opportunity to file an application to start bankruptcy proceedings against public authorities, local self-government authorities, state-financed institutions and organizations. But the new version of the law excluded such possibility. Moreover, the law regulates the appointment of administrative receivers or restructuring administrators by economic courts in bankruptcy cases. This appointment by courts will be temporary and will last until the Unified Judicial Information and Telecommunication System for the selection of administrators is put into operation.

 

Powers of the Ministry of Justice in financial monitoring extended

The list of persons subject to measures taken by the Ministry of Justice to counteract legalization of proceeds from crime and financing of terrorism has been extended.

The relevant changes were approved by the Resolution of the Cabinet of Ministers, which came into force on 12 June. Thus, the task of the Ministry of Justice is to counteract legalization of proceeds from crime, financing of terrorism and financing proliferation of weapons of mass destruction regarding:

— law offices, law associations and lawyers practicing law individually;

— notaries;

— business entities providing legal services;

— persons providing services related to the establishment, ensuring activities or management of legal entities.

The Ministry of Justice, in accordance with the tasks assigned to it, regulates and supervises the activities of entities of primary financial monitoring by conducting scheduled and unscheduled inspections, including in-office inspections.

Moreover, the Ministry of Justice checks the availability of professional training by senior officials and organization of professional training for other employees of entities of primary financial monitoring involved in its implementation.

At the same time, the Ministry informs the State Financial Monitoring Committee on compliance of entities of primary financial monitoring with the requirements of relevant legislation, including any violations and measures taken to eliminate and/or to prevent these in further activities thereof.

 

Law on simplifying investment attraction adopted

On 19 June the Ukrainian Parliament adopted Law On Amending Certain Legislative Acts of Ukraine on Simplification of Investment Attraction and Introduction of New Financial Instruments (Draft Law No. 2284). The document sets a package deal in relation to the following issues:

— markets for derivative financial instruments operation;

— capital markets and organized commodity markets operation, as well as development of their infrastructure;

— ensuring the protection of rights of bondholders, in particular, by establishing the institution of bondholders’ meeting and collective representative of corporate bond holders.

The law determines the legal basis for capital markets and operation of organized commodity markets in Ukraine, implementation of professional activities in these markets, regulates relations arising following the issue and circulation of securities, entering into and implementation of derivative contracts and deals related thereto.

Terms for bankruptcy proceedings extended and fines canceled

The Ukrainian Parliament adopted the Law On Amendments to the Bankruptcy Procedure Code of Ukraine (regarding prevention of abuses in the bankruptcy sphere for the period of measures aimed at preventing the outbreak and spread of COVID-19), (Draft Law No. 3322).

The law amends the Bankruptcy Procedure Code of Ukraine regarding the introduction of temporary mechanisms for the period of quarantine, and contains the following standards:

— the meeting and committee of creditors can be held remotely by video conferencing;

— the meeting and committee of creditors may be conducted by survey. The insolvency receiver shall forward a corresponding request for a draft decision on the proposed issue(s) to all participants of the meeting of creditors or members of the committee of creditors of a debtor;

— requests are sent to creditors to ­e-mail addresses indicated by creditors in applications with claims to the debtor, statements in fact or statements on procedural issues;

— the insolvency receiver is not responsible for non-performance of activities set by this Code if their performance does not meet the requirements of the quarantine established by the Cabinet of Ministers to prevent the spread of COVID-19;

— terms for pre-trial court proceedings on bankruptcy (insolvency), appeals within the framework of bankruptcy (insolvency) proceedings regarding invalidation of transactions executed by the debtor, moratorium to satisfy creditors’ claims, announcements of the first, repeated and (or) second repeated auction, fulfillment of the debt reorganization or restructuring plan, external management, liquidation, debtor’s liabilities restructuring and repayment, are extended.

For the period of validity of quarantine and within 90 days from the date of its cancellation, the initiation of bankruptcy proceedings in relation to debtors — legal entities upon request of creditors on claims against the debtor arising from 1 February  2020 is not permitted, and the term specified in part 6 Article 34 of this Code is extended. It is also proposed that the committee of creditors and the secured creditor (in respect of property that is the subject of collateral) have the right to decide on suspension of auctions related to the sale of the debtor’s property.

An important aspect is the proposal to suspend accrual of interest on the debtor’s obligations to creditors, rescheduled following the plan of reorganization or restructuring of the debtor’s liabilities. Penalties for non-fulfillment of such obligations by the debtor are not charged. Overdue obligations stipulated by the plan of the debtor’s liabilities reorganization or restructuring are subject to installment for the period of completion of the plan of the debtor’s liabilities reorganization or restructuring.